ABSTRACT
W HEN war broke out in 1914 few people suspected howcomplex were the economic demands it must makeand the economic changes it would bring. Previous experience was not a helpful guide. Since 1815 Europe's wars had been small and brief, and the effects of the revolution in armaments which had taken place since 1870 had not been demonstrated in a major conflict of great powers. Peacetime experience had shown that defence was more costly than ever before and it was obvious that in a large war its cost must be multiplied many times. The one economic fact generally recognized as certain was that war between great powers must be very expensive, especially to Britain, which would doubtless have to give financial help to its allies, and the expense might be matched by increases in taxation so great that some suspected that they would spell ruin. There were also prophets, not universally disregarded, who had foretold that the new armaments would bring death and destruction on a scale that would be beyond endurance, in terms both of economic loss and human misery.! Even to those who suspected that such prophecies were exaggerated it seemed likely that another major economic task in war would be to develop extra effort to make good as quickly as possible the losses caused by physical destruction. Much of this, however, might perhaps be postponed until hostilities had ended. It had not the same imminence and urgency as the budgetary task which, in the eyes of most influential people, was the essential economic problem posed by war.
